No Bargains in Food

As the market continues to flirt with all-time highs and merger mania is
in the air, MoneyShow's Tom Aspray takes a technical look at a
sector highlighted by Warren Buffett's most recent purchase of the iconic
ketchup company.

The rising M&A activity has certainly helped keep the market's tone
positive. Tuesday's close was the strongest we have seen since early in the
month when another short-term trading range was also completed. Market internals
were better than 2-1 positive and the NYSE A/D line has made another new high.

The buyout of H.J. Heinz Company (HNZ)
has turned the focus on the food stocks and has given quite a boost to the
S&P Consumer Staples sector, which broke out of a 12-year trading range last
year. The gains have been dramatic for what is generally considered to be a
defensive sector.

The Sector Select SPDR Consumer Staples (XLP)
is up 8.9% so far in 2013 versus just a 7.6% gain in the Spyder
Trust (SPY).
With one food stock already in the Charts in Play portfolio, what other
food stocks should you be watching?

Click
to Enlarge

Chart Analysis: The Sector Select SPDR Consumer Staples (XLP)
closed above the early October highs, line a, on January 25. This makes $36.70
the first level of strong support.

Tuesday's close was quite near the daily starc+ band with the weekly starc+ band now at $38.41.

The daily relative performance has been in a short-term uptrend since
early in the month.

The weekly RS line (not shown) is likely to move above its declining WMA
this week.

The daily OBV looks much stronger as it confirmed the price action by
overcoming the resistance at line c.

There is first support for XLP at $37-$37.40 with stronger in the $36.40
area.

General Mills Inc. (GIS)
staged a marginal breakout in December as it overcame the resistance at $41.15,
line d.

After the breakout, GIS dropped back to the $40 level in the latter part
of December and tested its uptrend, line e.

The daily relative performance is just completing its bottom formation
as it has moved through resistance at line e.

The RS line has been in an uptrend since last September.

The daily OBV broke through its resistance from 2011 in early 2012 and has
been in a strong uptrend, line g, since last summer.

The weekly OBV (not shown) is well above its rising WMA.

There is minor support now at $44 with much stronger in the $43.40-$43.30
area.

NEXT PAGE: 2 Food Stocks to Watch

|pagebreak|

Click
to Enlarge

Kellogg Co. (K) had
been one of the lagging food stocks but it broke through resistance from 2009,
line a, in January.

This makes the first important support in the $56-$57.40 area.

The weekly starc+ band is now at $61.18 and the long-term trading range
has upside targets in the $67-$70 area.

The weekly relative performance completed a bottom formation in late
December but is still below its long-term downtrend, line b.

The weekly on-balance volume (OBV) started accelerating to the upside
last November after it overcame long-term resistance at line c.

The OBV breakout led prices by almost two months.

Hormel Foods Corp. (HRL)
developed a trading range from the middle of 2011 through the end of December
2012 (line d and e).

The resistance at line d was slightly overcome in the middle of December
and then HRL accelerated to the upside after it announced it was acquiring
Skippy Peanut Butter.

The stock has closed higher for the past seven weeks.

The upside target from the trading range, lines d and e, has already been
met.

The weekly relative performance overcame its resistance, line f, in early
January.

The OBV has been rising more sharply than prices since the middle of last
year, line i.

The OBV broke through its resistance, line h, in the middle of January.

There is initial support now at $34.40-$35.60.

What it Means: It is hard to know whether there will be
further buyouts in the consumer staples sector but the recent long-term breakout
in Kellogg Co. (K) is quite impressive.

A retest of the breakout level should be a good buying opportunity.

How to Profit: For Kellogg Co. (K), go
50% long at $57.76 and 50% long at $56.52, with a stop at $54.28 (risk of
approx. 5%).

Portfolio Update: On December 17, I recommended going 50% long General
Mills Inc. (GIS)
at $40.61 and 50% long at $40.14. Use a stop now at $41.28.